1.

TAXATION DEFINED
- It is an attribute of sovereignty and emanates from necessity
- It refers to the inherent power of the state to demand enforced contribution u
pon its subjects and objects within its territorial jurisdiction for public purp
ose to support the government.
2. THEORY OF TAXATION
a. PRINCIPLE OF NECESSITY - the existence of the government is a necessity and
it cannot continue without means to support itslef.
b. BENEFIT-RECEIVED THEORY - the government and the people have the reciprocal
and mutual duties of support and protection to one another

c.LIFEBLOOD DOCTRINE - taxes are the lifeblood of the government without which
it can neither exist nor endure. Without money the government cannot deliver ser
vices to the people or fucntion and serve the people.
BASIS OF TAXATION
a. BENEFIT-RECEIVED THEORY (mutual and reciprocal duty of support and protect
ion between the government and the people.
b. The sovereign power of the State over its people and property
C. the presumption of receipts/enjoyment of benefits and protection by the peo
ple.
d. To protect new conditions by imposing special duties.
e. To uplift social conditions by imposing regulatory taxes/licenses.
3. PURPOSE OF TAXATION
a. Primary - to raise or generate revenues and to mobilize resources
b. Secondary or Regulatory (RAP) - to regulate the conduct of business or p
rofessions
to achieve economic and social stability

to protect local industries
c. Compensatory (RKSPT) - Reduces inequalities in wealth distribution
- Key instument of social control
- Strengthens anemic enterprises
Provides incentives
- Check inflation
- Tools on international bargains
- Promote Science and Invention
- Use as implement in the exercise of police power t
o promote general welfare
4. NATURE AND EXTENT OF POWER TO TAX
SCOPE OF POWER TO TAXATION - It is supreme, comprehensive , unlimited and ple
nary. It includes the power to destroy
OBJECT OF TAXATION
A. bUSINESSES
b. interests
c. Transactions
d. rights
e. acts
f. Persons (natural or juridical)
g. Properties( real or personalm, tangible or intangible)
h. privileges
5. ESSENTIAL CHARACTERICTICS OF TAX
A. It is for the public purpose
b. It is inherently legislative
c. It is subject to international comity or treaty
d. It is an exaction payable in money
e. It is territorial
f. It is not absolute because its exercise is subject to constitutional limi
tations and inherent restrictions
6. ELEMENTS OF A VALID TAX
A. it must violate the constitutional, inherent and and/r contractual limita
tions of the power of taxation.
b. It must be uiform and equitable , not unjust, excessive , oppresive , con
fiscatory or discriminatory
c. It must be for public purpose

d. The power imposing it must have jurisdiction over the obje of taxation
e. It must be proportionate in character.
f. generally payable in money , at regular interval (not a regular payment);
g. Levied by the legislature taht has jurisdiction over the object of taxati
on
7. Phases or Stages of Taxation

IMPACT OFTAXATION
a. LEVY OR IMPOSITION - Generally, it cannot be delegated. This usually incl
udes the
1. Selection of Coverage, Object, Nature, Extent, Su
its (CONES) in taxation
2. its purpose
3. prescribing the rules in taxation in general
b. Asssessment or Collection - delegable by a valid statue

INCIDENCE OF TAXATION
c. Payment of the Tax - the response of the people to the revenue bill duly
encated by the lawmaking body of the government in the exercise of its power of
taxation
8. ELEMENTS OF A TAX SYSTEM
A. Tax Structure - Refers to the tax rates, tax base, tax subjects and other
taxable events as they relate to revenue productivity , tax progressivity , equ
ity and and the political, social and economic goals of t
he government.
b. Tax administration - It is the system involving assesment, collection and
enforcement of taxes , including the execution of judgement on all tax cases de
cided by the courts in favor of the gover
nment . It includes the organizational structure , personnel, set up operational
procedures and financing of the tax implementati
on agency.
c. Public Tax consciousness - This is related to the level of voluntary and
honest compliance of tax obligations by the people.
9. PRINCIPLES OF SOUND TAX SYSTEM
a. fiscal adequacy - The sources of revenue must be adequate to meet governme
nt expenditures and their variation regardless of business conditions.
b. administrative Feasibility - Tax laws should be capable of convenient , ju
st and effective iadministration. they should be clear, concise and capable of p
roper and economic enforcement, convenient as to ti
me and manner of payment and not burdensome.
c. theoritical justice- Taxes levied must be based upon the ability of the ta
xpayer to pay, it must not be unduly burdensome, confiscatory or discouraging to
business . It must be uniform and equitable.
10. to be photocopied.
11. CLASSFICATION OF TAXES.
A. AS TO PURPOSE
1. Fiscal (general or revenue) - they are levied wihtout a specific or p
re-determine purpose.

2. Regulatory (special or sumptuary) - those intended to achieve some so
cial or economic goals
B. A TO SUBJECT MATTER
1. Personal (poll or capitation) - does not consider the amount of prope
rty , occupation of business of the taxpayer.
2. property Tax
3. Excuse (privilege tax)
C. As to incidence ( Who pays the burden of taxation?)
1,. Direct Tax - It is imposed on the person obliged to pay the same and
this burden cannot be shifted or passed on to another (i.e. income tax)
2. Indirect Tax - The payment is demanded from the person who is allowed
to transfer the burden of taxation to another. ( i.e Value added tax)
> if the end-user is tax exempt - (a) the exemption applies only
to direct taxes and the buyer cannot claim tax refund on those taxes that were
passed to him. (b) the seller cannot claim the exemption as wel
l.
> The remedy of seller is enjoying both exemptions from direct a
nd indirect taxes - Avail of the remedy of tax refund from the government.
An importer paid excise taxes on petroleum products whic
h were sold to NPC. The lattter enjoys both exemptions from directand indirect t
axes , and therefore, Sec. 135 of the tax code comes to play and operat
es to grant the supplier tax exemption because it cannot shift the burden of tax
ation to NPC ( end-user) , the impoter should be entitled to a tax cre
dit certificate

In indirect taxes, the person authorized to claim for the refund is the payor
not the end consumer.
D. AS TO AMOUNT (EXCISE TAX)

1. Specific Tax - This is a fixed amount based on volume, weights or quant
ity of goods as measured by tools, instruments or standards. It requires no asse
ssment as the subject of taxation is often listed according to their general cl
assification. (ex. tax on gasoline , LPG, petroleum, products, wires)
2. Ad valorem tax - This imposition is based on the value of the property
subject tax. Assessment is necessary to determine the amount payable. ( tax on
automobile and properties)
. excise tax , wheter classified as specific or ad valorem tax is basica
lly an indirect tax imposed on the consumption of a specific list of goods or pr
oducts. The tax is directly levied on the manufacturere upon removal of
the taxable goods from the place of production but in reality , the tax is passe
d on the to the end-consumer as prt of the selling price of the goods so
ld.
E. AS TO RATE
1. Proportaion or flat rate - unitary or single rate ex. 12% VAT.
2. Progressive or graudated tax - as the tax base grows the tax rate inc
reases . (ex. Individual income tax , 5% - 32 %
3. Regressive tax - the tax rate increases as the tax base decreases
4. Degressive tax- the increase in tax rate is not proportionate to the
increase of tax base
5. mixed tax - at certain point it is progressive , then regressive.
F. AS TO AUTHORITY IMPOSING TAX
1. National Tax
2. Local Tax
14. SKIP

15. LIMITATIONS ON POWER TO TAX
A. INHERENT LIMITATIONS
(1) PUBLIC PURPOSE -
(2) INTERNATIONAL COMITY
(3) TERRITORIALITY
(4) NON-DELEGATION OF POWER TO TAX
(a) Exceptions
(b) powers tat cannot be delegated to Congress
(5) Exemption of Government agencies
B. CONSITUTIONAL LIMITATIONS
1. DUE PROCESS - requires previous notice and hearing or to the exercie
of taxation within the territorial jurisdicition of the taxing authority.
2.EQUAL PROTECTION OF LAW - All persons subject to legislation shall be
treated alike under like circumstances and conditions both in privileges conferr
ed and liabilities imposed.
3. UNIFORMITY IN TAXATION - all taxable articles, kinds of properties of
the same class , shall be taxed at the same rate or all subjects/objects that a
re similarly situated are treated alike as to burden that m
ay be imposed and the benefits that may result.
4. PROGRESSIVE SYSTEM OF TAXATION - is based on the ability-to pay princ
iple and it favors the imposition of direct taxes rather than the indirect taxes
.
5.NON-IMPRISONEMENT FOR NON PAYMENT OF POLL TAX
6. NON- IMPAIRMENT OF THE OBLIGATION AND CONTACT RULE
7. APPROPRIATION , REVENUE AND TARIFF BILLS MUST ORIGINATE EXCLUSIVELY I
N THE HOUSE OF REPERESENTATIVES but the Senate may propose or concur with amendm
ents.
8. PRESIDENTIA VETO - the President shall have the power to veto any par
ticular item(s) in an appropriation, revenue or tariff , but the veto shall not
affect the item(s) to which no objection has been made.
- THE President's derivative power to ta is provided
under the Constitution (Art.6 , sec. 28(2)) and Sec 401 of the Tariff and Custo
ms code is the ebaling law that made effective t
he delegation of the taxing power to him.
9. PRESIDENTIAL POWER TO FIX TARIFF RATES
10. FREEDOM OF THE PRESS
11. FREEDOM OF RELIGION - religious entities selling or distributing rel
igus literature is subject to VAT-registration fee imposed oon Non-vat enterpris
es - No violation of the free worship clause because it is not imposed f
or the exercise of the privilege but only for the purpose of defraying part of t
he cost of registration
12. EXEMPTION FORM PROPERTY TAX OF PROPERTIES OF RELIGIOUS , EDUCATIONAL
AND CHARITABLE INSTITUTIONS -
13. TAX EXEMPTION GRANTED TO A NON-STOCK , NON PROFIT EDUCATNAL AND CHAR
ITABLE INSTITUTION INCLUDING GRANTS, ENDOWMENTS -
14. NO PUBLIC MONEY SHALL BE USED FOR A PARTICULAR SECT , PRIET , RELIG
IOUS MINISTERS
15. GRANT OF TAX EXEMPTIONS
16. GRANT OF POWER TO TAX TO LOCAL GOVERENT UNITS
17. MONEY COLLECTED FOR A SPECIAL PURPOSE SHALL BE CONSIDERED A SPECIAL
FUND ;
18. EXCLUSIVE APPELLATE JURISDICTION OF THE SUPREME COURT OVER JUDGEMENT
S OF LOWER COURTS INVOLVING THE LEGALITY OF TAXES, IMPOSTS, ASSESSMENTS, FEES AN
D PENALTY.
16. DOCTRINES/PRINCIPLES IN TAXATION
A. dOCTRINE OF SOVEREIGN EQUALITY
- The international rule maintains that property or income of a
foreign state or government may not be the subject of taxation by another State.
If a tax law violates some international treaty, laws or convention ,
it is not only invalid but unconstitutional because the Constitution provides t
hat: Philippine adopts the generally accepted principles of internationa
l laws as part of the law of the land.
B. DOCTRINE OF THE MOST FAVORED NATION CLAUSE
- This concept is intended to establish the proinciple of equali
ty of international treatment by providing that the citizens of subjects of the
contracting nations may enjoy privileges accoreded by either party to those of t
he mostfavored nation. This will aloow the taxpayer of one state
to avail of more liberal provisions granted in another tax treaty to whi
ch the country of residence of such taxpayer is also a party provided that the s
ubject matter of taxation is the same as that in the tax treaty under w
hich the taxpayer is liable.
C. DOCTRINE OF PRIMARY JURISDICTION
- it precludes a court from arrogating unto itself the authority
to resolve a controversy the jurisdiction over which is initially lodged with a
n administrative body of special competence.
- when the determination requires expertise , specialized skills
and knowledge of the proper administrative bdies because thecnical matter or in
tricate questions of fact are involved , the relief must first be obtain
ed in an administrative proceeding before a remedy will be supplied by the Court
even though the matter is wihtin the jurisdiction of the court.
D. DOCTRINE OF JUDICIAL NON- INTERFERENCE
- The courts cannot inquire into the wisdom of the taxing act or
the advisability or expediecy of the tax measure. The impracticability and absu
red consequences of a tax law should be address to the legislature a
nd administrative authorities and NOT the Court.
E. THE MARSaLL DICTUM
- The power to tax includes the power to destroy because the tax
payer has no choice except to pay the tax being imposed if he is covered by the
imposition.
- it has no application to a lwful tax. This is pertinent only w
hen there is no power to tax a particular subject and it has no relaion to such
a case where such dright exist, because the power to destroy may be a c
onsequence of taxation , but it can not tax to the point of confiscation.
F. HOLMES DOCTRINE
-tHE power to tax is not the power to destroy. In the exercise o
f the taxing power the authority should not violate the constitutional , inheren
t and contractual limitations otherwise the court has the primordial d
uty to decalre the smae void and unconstituional , thereby preventing the destru
ctive nature of power of the taxation.
G. PRINCIPLES OF APPROVAL OF AN ADMINISTRATIVE INTERPRETATION THRU REENA
CTMENT
-
H. THE PROSPETIVITY RULE
- the tax laws are prospective in character and in application
exceptions :
a. The retroative application is necesarily implied form the lan
guage used.
b. It involves income tax
c. the retroactive application is intended by the Congress.
> when the tax law imposes a criminal liabilty it annot be given
a retroactive effect because that would violate the ex post facto law , but if
it imposes civil penalties like fines and forfeiture , it can be gi
ven a retroactive effect unles it produces harsh consquences , its validity may
be questioned on grounds of equity and due process.
J. THE IMPRESCRIPTIBILITY OF THE TAX LAWS
- taxes are imprescriptible unless the law itself lprovides for
prescription.
H. NATIONAL TAXES ARE NOT SUBJECT TO LEGAL COMPENASATION
a. lifeblood doctrine
b. the government and the taxpayer are not creditor and debtor t
o each other.
c. taxes are not in the nature of contracts between the parties
but grew out of duty.
case law: The city of manila is entitled to 25% share in
the franchise tax payable by Manila Jockey club on its gross earnings from hors
e races. City of Manila was not paid because the National Treasury failed
to release the same. Thus, the city of manila refuse to remit taxes it witheld t
o compensate for its 25% share . HELD. NO legal basis because a.) taxes ar
e not subject to set-off b) the Lifeblood doctrine
EXCEPTIONS:
A) the legal compensation by operation of law , when both claims
the local government and the taxpayer against each other have already become d
ue, demandable, and fully liquidated.
b.) In case of overpayment of a tax, the BIR's obligation to ref
und or set-off arises from the moment the tax was paid under the principle of so
lutio indebti.
I. PRINCIPLE OF STRICTISSIMI JURIS
-Taxation is the rule and the exemtion is the exception. Tax exe
mptions must be strictly construed against the tax payer and liberally in favor
of the government.
EXCEPTIONS: when is tax exemption construed in favor of the taxp
ayer?
1. exemptions in favor of the government
2. Exemptions in favor of the traditional exemptees
3. when the law itself provides
4. Retirement laws
5. exemptions in favor of special classes of taxpayers u
nder special circumstamces
J. DOCTRINE OF ESTOPPEL
- in the performance of its governmental functions , the State c
annot be estopped by the neglect , errors, or mistakes of its agents or officers
. Thus, the erronous application and enforcement of law by publi
c officials do not block the subsequent correct application of the statutes. ( t
his doctrine works against the taxpayer)
K. DOCTRINE OF EQUITABLE RECOUPMENT
-When the refund of taxes are barred by presciption which can no
longer be claimed by a taxpayer but there is a present tax being based assessed
against the saod taxpayer , such present tax may be recoup or se
t-off against the tax , the refund of which has been barred. r
L. TAXPAYER'S SUIT
-It is a class suit brought by one or more taxpayers (natural or
juridical) on behalf of themselves and as a representation of a class of
taxpayers situated withina taxing district and for the purpose of seeking from t
he illegal or unauthorized acts of the government or its tax officials which
acts are injurious to their common interest as taxpayers
17. SOURCES OF TAX LAWS
a. Constitution
b. Statutes and Presidential Decrees
c. Executive Orders and Batas Pambansa
d. Local Ordinances
e. Revenue regulations promulgated by the Department of Finance
f. Administrative Issuances or BIR rulings
g. Judicial Decisions
h. Tax treaties and conventions with foreign countries
18. SITUS OR SUBJECT OF TAXATION
- SituS means the place of taxation or the authority that can collect th
e tax because it gave the subject or object of taxation protection; the state wh
ich has jurisdiction to impose a particular tax upon persons, property interest
, rights or transactions because it has extend benefits to the subject or object
of taxation.
WHAT DETERMINES THE SITUS OF TAXATION IN THE PHILIPPINES?
- income may be taxed in one or more or all of the following places or c
ountries
a. the place where the taxpayer is a citizen
b. the place where the taxpayer is resident
c. the place where the income was earned or derived.
Thus, if a German national residing in the US receives dividend from a P
hilippine domestic corporation , said dividend may be taxed in Germany where he
is a citizen , or in the US , where he is a resident , or in the Philippines whe
re the income was earned or derived.
19. FACTORS THAT DETERMINE THE SITUS OF TAXATION
A. subject matter of the tax
b. Nature, kind or classification of the tax being imposed.
c. citizenship of the taxpayer
d. residence of the taxpayer
e. source of income
f. Place of exercise, business or occupation being taxed.
g. Place where activity that produced the income was hel or done.